The Unreal Estate Boom

The 79th Richest Nation on Earth doesn't exist. The population is 225,000, the hourly wage $3.42. Welcome to virtual paradise, where a carpenter can live in the castle of his dreams – if he doesn't mind an 80-hour workweek double-clicking pig iron and hoarding digital dung.

Not long ago, a 43-year-old Wonder Bread deliveryman named John Dugger logged on to eBay and, as people sometimes do these days, bought himself a house. Not a shabby one, either. Nine rooms, three stories, rooftop patio, walls of solid stonework – it wasn't quite a castle, but it put to shame the modest redbrick ranch house Dugger came home to every weeknight after a long day stocking the supermarket shelves of Stillwater, Oklahoma. Excellent location, too; nestled at the foot of a quiet coastal hillside, the house was just a hike away from a quaint seaside village and a quick commute from two bustling cosmopolitan cities. It was perfect, in short, except for one detail: The house was imaginary.

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Kenn BrownCastle: $2,053 (eBay resale price)

Equally unreal were the grounds the house stood on, the ocean it overlooked, the neighboring cities, and just about everything else associated with it – except Dugger himself, the man he bought it from, and the money he shelled out. At $750, Dugger's winning bid on the property set him back more than a week's wages and was, on the face of it, an astonishing amount for what he actually bought: one very small piece of Britannia, the fantasy world in which the networked role-playing game Ultima Online unfolds.

Yet there was nothing particularly unusual about the transaction. On any day you choose, dozens of Britannian houses can be found for sale online at comparable prices. And houses are just the start of it. Swords, suits of armor; iron ingots, lumber, piles of hay; tables, chairs, potted plants, magic scrolls; or any other little cartoon item the little cartoon characters of Britannia might desire can be had at auction, priced from $5 for a pair of sandals to $150 for an exceptionally badass battle-ax to $1,200 for a well-located fortress. A simple, back-of-the-envelope calculation puts the estimated sum of these transactions at $3 million per year.

Which in turn is just a fraction of the total wealth created annually by the residents of Britannia. For every item or character sold on eBay and other Web sites, many more are traded within the game itself – some bartered, most bought with Britannian gold pieces (a currency readily convertible into US legal tender at about 40,000 to the dollar, a rate that puts it on par with the Romanian lei). The goods exchanged number in the millions, nearly every one of them brought into existence by the sweat of some player's virtual brow. Magic weapons won in arduous quests, furniture built with tediously acquired carpentry skills, characters made powerful through years of obsessive play – taken as a whole, they are the GNP of Britannia.

Literally. Last year – in an academic paper analyzing the circulation of goods in Sony Online's 430,000-player EverQuest – an economist calculated a full set of macro- and microeconomic statistics for the game's fantasy world, Norrath. Taking the prices fetched in the $5 million EverQuest auctions market as a reflection of in-game property values, professor Edward Castronova of Cal State Fullerton multiplied those dollar amounts by the rate at which players pile up imaginary inventory and came up with an average hourly income of $3.42. He calculated Norrath's GNP at $135 million – or about the same, per capita, as Bulgaria's.

In other words, assuming roughly proportional numbers for Electronic Arts' 225,000-player Ultima and other major online role-playing games – Mythic's Dark Age of Camelot, Microsoft's Asheron's Call, Funcom's Anarchy Online – the workforce toiling away in these imaginary worlds generates more than $300 million in real wealth each year. That's about double what the game companies themselves make in subscription revenue, a fact that poses them a single, nettlesome question: How – and whether – to grab a piece of the action?

For the rest of us, though, the questions are a little more philosophical. The traffic in virtual goods, after all, isn't just another new market. It's a whole new species of economy – perhaps the only really new economy that, when all has boomed and crashed, the Internet has yet given rise to. And how poetic is that? For years, the world's economy has drifted further and further from the solid ground of the tangible: Industry has given way to postindustry, the selling of products has given way to the selling of brands, gold bricks in steel vaults have given way to financial derivatives half a dozen levels of abstraction removed from physical reality. This was all supposed to culminate in what's been called the virtual economy – a realm of atomless digital products traded in frictionless digital environments for paperless digital cash. And so it has. But who would have guessed that this culmination would so literally consist of the buying and selling of castles in the air?

These little economies raise big questions, therefore, and by no coincidence, they tend to be the big questions of the economic age. How, for instance, do we assign value to immaterial goods? What defines ownership when property becomes as fluid as thought? What defines productivity when work becomes a game and games become work?

And, of course, the question of questions – the one that in a sense asks them all: How, exactly, did a 7-Kbyte piece of digital make-believe become John Dugger's $750 piece of upmarket real estate?

At a construction site in Indianapolis, Troy Stolle sits with a hard hat in his lap and a Big Mac in his hands. Outside, the air is thick with dust and the rumble of bulldozers. A hundred yards away, the outline of a future Costco megastore shimmers in the heat, slowly taking shape as workers set rebar and pour concrete. Stolle's job, as a form carpenter, is to build the wooden molds the concrete gets poured into. His arms and hands are flecked with cuts and bruises, and at the moment he's got a pounding headache from the early stages of dehydration. Or maybe from the two-by-four that smacked him in the head earlier this morning. He's not certain which.

There's one thing he's sure of. Asked how this job compares to the work of building a virtual tower in Britannia two years ago, he answers like it's obvious: "That was a lot more stressful."

A lanky, bespectacled 30-year-old, Stolle looks less like the third-generation construction worker he is than like the second-generation sword-and-sorcery geek he also is. When Stolle was 10, his father, a union electrician, died of a heart attack, leaving behind a cherished 1967 paperback edition of The Lord of the Rings and a copy of the Dungeons & Dragons rule set.

It all started there. Through high school, on through his four-year union apprenticeship, and well into his first years as a carpenter, Stolle spent vast stretches of his free time immersed in the intricacies of D&D, Warhammer, BattleTech, and other tabletop role-playing and strategy games.

Photo: Kenn BrownWith a suit of Invuln plate mail ($49) and a Daemon Slayer Katana ($55), you're ready for business in Ultima Online. Both can usually be found on eBay.

Then came Ultima Online. The first true massively multiplayer online role-playing game, UO went live in September 1997, and by December, Stolle had a character: a blacksmith he called Nils Hansen. The business of bettering Nils' lot in life quickly came to absorb him more intensely than any game ever had. In short order, he added two other characters: an archer, who went out hunting when Nils needed hides, and a mage, who cooked up potions to make the archer a better hunter. "I had everybody interlocked so that they totally supported one another," Stolle says. And to give this little team a base of operations – a place to store equipment, basically – he paid about 40,000 gold coins for a deed permitting him to build a small house. He found a nice, secluded spot in northern Britannia, placed his cursor there, and double-clicked the building into existence.

The house worked out fine for a while, but in a game about accumulation, no house stays big enough for long. Stolle's trio needed new digs, and soon. By now, though, real estate was acutely hard to come by. Deeds were still available, but there was nowhere left to build. The number of homeless was rising, and the prices of existing houses were rising even faster. At last, EA announced a solution that could work only in a make-believe world – a whole new continent was being added to the map.

Stolle started preparing for the inevitable land rush months before it happened. He scrimped and saved, sold his house for 180,000 gold, and finally had enough to buy a deed for the third-largest class of house in the game, the so-called Large Tower.

On the night the new continent's housing market was set to open, Stolle showed up early at a spot he had scouted out previously, and found 12 players already there. No one knew exactly when the zero hour was, so Stolle and the others just kept clicking on the site, each hoping to be the first to hit it when the time came.

"It was so stressful," Stolle recalls. "You're sitting there, you double-click the deed once and then click on the spot. And I did this for four hours." Finally, at about 1 in the morning, the housing option switched on, and as a couple thousand "Build" commands went through at once, the machine that was processing it all swooned under the load. "The server message pops up, and everything just freezes. And I'm still clicking. Even though nothing's happening, I'm still clicking – boom, boom, boom. For like 10 minutes, everything's frozen. You see people kind of disappearing here and there. And then it starts to let up. And a tower appears! Nobody knows for sure whose it is. Guys are like, Whose is it? Did I get it? I double-clicked on it, and I couldn't tell. And so then I double-clicked again – and there was my key to the tower."

Just like that. In a single clock cycle and a double mouseclick, Stolle had built himself a real nice spread.

But of course there was more to it than that. In addition to the four hours of clicking, Stolle had had to come up with the money for the deed. To get the money, he had to sell his old house. To get that house in the first place, he had to spend hours crafting virtual swords and plate mail to sell to a steady clientele of about three dozen fellow players. To attract and keep that clientele, he had to bring Nils Hansen's blacksmithing skills up to Grandmaster. To reach that level, Stolle spent six months doing nothing but smithing: He clicked on hillsides to mine ore, headed to a forge to click the ore into ingots, clicked again to turn the ingots into weapons and armor, and then headed back to the hills to start all over again, each time raising Nils' skill level some tiny fraction of a percentage point, inching him closer to the distant goal of 100 points and the illustrious title of Grandmaster Blacksmith.

Take a moment now to pause, step back, and consider just what was going on here: Every day, month after month, a man was coming home from a full day of bone-jarringly repetitive work with hammer and nails to put in a full night of finger-numbingly repetitive work with "hammer" and "anvil" – and paying $9.95 per month for the privilege. Ask Stolle to make sense of this, and he has a ready answer: "Well, it's not work if you enjoy it." Which, of course, begs the question: Why would anyone enjoy it?

But people do. And that's a curious thing. Throughout history, whenever human beings have tried to imagine the best of all possible worlds, they've pictured some version of paradise: a place of abundance and ease. Not too long ago, people insisted the Internet was just such an environment, with its effortlessly reproducible wealth of data and light-speed transcendence of geography and time. In the emerging online universe, it was said, scarcity had no place. And what's not to like about that?

Yet scarcity has turned out to be a feature, not a bug. Sure, people like the big, graphics-based chat arenas such as the Palace, where talk was the only real commodity, and that commodity was, as usual, cheap. But the worlds they actually want to be in – bad enough to pay an entrance fee – are the ones that make the digital goods hard to get to and even harder to copy. The addictive appeal of online role-playing games suggests that people will choose the constraining and challenging world over the one that sets them free.

Kenn BrownRares: Some game items are valued simply as oddities (like the blue hair dye ($3) above). Specialized sites like the Blackdagger Database track their availability and market price.

Which in turn makes the fact that you can log on to eBay this minute and buy 10,000 imaginary iron ingots for $4.50 seem not only a little less improbable but in fact inevitable. Scarcity, after all, breeds markets, and markets will seep like gas through any boundary that gives them the slightest opening – never mind a line as porous as the one between real and make-believe.

"The minute you hardwire constraints into a virtual world, an economy emerges," explains Castronova, the Adam Smith of EverQuest. "One-trillionth of a second later, that economy starts interacting with ours."

On the border between Britannia's economy and ours sits Bob Kiblinger's downstairs den – part of a nice split-level house located in quiet Beckley, West Virginia. In the den sits a sofa, and on the sofa, most workdays, sits Kiblinger. As sole proprietor of UOTreasures.com, Kiblinger trades Ultima items for a living, scanning eBay listings on his laptop in search of assets undervalued and overlooked. One particularly lucky day, he caught sight of a diamond in the rough: UO account, 52 months old, Grandmaster Blacksmith, Large Tower. Not a single bid, he noticed.

Troy Stolle's account was definitely an opportunity. Kiblinger sized it up at about $1,500 worth of stuff, possibly $2,000. He fired off an email asking Stolle how much money he wanted to close the deal and hand over the account. Stolle emailed back: $500. Minutes later, Kiblinger was on the phone to Indiana, making arrangements to finalize the transaction. Before he hung up, the two men chitchatted a bit: Stolle got to talking about the unfortunate reasons he'd sold the account – about how he'd been out of work since 9/11 and the bills were piling up. Kiblinger could hear an infant crying in the background, and he hoped the carpenter would never find out just how much stood to be made on the deal.

But business is business. Kiblinger knew that to keep his income up to speed he needed at least three or four fat, high-margin trades like this each week, and they weren't getting any easier to come by. Once upon a time, back when Ultima was young and most players still hadn't gotten wind of the auction markets, his percentage on a deal often hit quadruple digits. Players sold him thousand-dollar accounts for a hundred, and Kiblinger just kept his mouth shut, knowing full well that in their eyes he was the crazy one. Not long before, he might even have agreed with them.

Kenn BrownBundle of hay ($16).

"I would have done the same thing," he says. "If I had an account I was giving up, and you said you were going to give me a hundred dollars for it – for something that's not real – I would have said, 'Here, take it.'"

That was four years ago. Kiblinger was 28 years old, married, working for Procter & Gamble in Cincinnati as a chemist (he shares two patents on the odor-busting fabric spray Febreze), and feeding his Ultima jones at night and on weekends. Within a year, his marriage was over ("Yes, it's true, an Ultima widow"), he had moved back home to Beckley, and he was brokering make-believe products full-time. Asked how much he was earning by then, Kiblinger smiles affably and declines to answer, except to say that it was – and remains – a lot more than he made at Procter & Gamble.

Kiblinger's caginess is par for the course. There are dozens of people out there making a real living selling virtual goods, and none are particularly eager to disclose their profits. A few will talk off the record, and none of those claim to be netting less than six-figure incomes or 15 percent margins. But those are fragile numbers, threatened on all sides.

Hackers are among the biggest threats. To stay ahead of the latest tricks for stealing players' hard-won property – and to safeguard his own inventory – Kiblinger checks the Ultima cheat sites regularly. Even worse are the dupers – counterfeiters who look for software bugs that let them double and redouble their gold on command, turning a single piece into billions with just a few dozen mouseclicks. Not a bad deal for the dupers but deadly for the Britannian economy: Some of Ultima's earliest duping schemes inflated the currency to the brink of worthlessness. Even today, the resulting monetary surplus keeps the game designers busy thinking up gold sinks – expensive luxury items that can be bought only from non-player merchant bots (neon-colored hair dye is an especially big seller), thus taking large sums of money out of circulation.

Kenn BrownStack of logs ($144).

Ultimately, though, the spookiest threat to the dealers is the game companies themselves.

Well aware that his income exists at the sufferance of Ultima's corporate overseer, Electronic Arts, Kiblinger keeps his inventory as low as possible – even so, it often swells to tens of thousands of dollars' worth of goods.

"It's scary to have that much cash tied up in the business," he says, "when Ultima could just say, 'We deem this outside the rules. You're done.'"

Sony did this very thing last year when it announced a ban on the EverQuest auction market and got eBay to enforce it. But even seemingly market-friendly moves can play havoc with the traders' livelihoods. Recently EA announced that Ultima players could now, for a mere $29.95, order their own custom-built, high-level characters straight from the company.

At the far end of this line of thinking lie concepts like MindArk's Project Entropia, a game still in beta in which every item will be available for sale direct from the company – a move that could finally make corporate peace with the auction markets by rendering them completely superfluous.

Until then, though, Kiblinger remains relatively safe from competition. To watch him in action once he finally gets his hands on an account like Stolle's is to understand, a little, the uncommon expertise it takes to make this business pay. As he logs on for the first time and starts taking inventory, the casual once-over of his initial appraisal sharpens to a laser focus. Wandering through the newly auctioned house in the onscreen body Stolle previously inhabited, Kiblinger becomes a value-sifting machine. He's equipped with a massive mental database and can cross-reference the most obscure imaginary item with its latest market price.

Houses are invariably the most valuable items, and the easiest to judge. But almost as much money can lie hidden in a far subtler class of objects known as rares – curiosities whose value consists entirely, as the name suggests, in their scarcity. The original rares were accidents, pieces of scenery that the game designers misprogrammed or otherwise forgot to lock down – rocks, piles of horse dung, patches of waterfall, even portable error messages. By the time Kiblinger got into the market, these freaks of virtual nature were hundred-dollar collectibles, and for a long time they were his bread and butter. Eventually, the designers caught on to their popularity and introduced semi-rares: decorative fruit baskets and other knickknacks that pop into existence every month or so in some remote backwater of the land. This took a lot of the economic steam out of the rares scene, and Kiblinger shifted his focus to the tight housing market.

Kenn BrownOpen book ($5).

But the true rares remain big-ticket items, and so he is obliged to keep in mind, as he sorts through a new account, that an innocuous-looking piece of horse crap still sells for as much as $400. Such arcana make the job of sweeping out a typical account a two- or three-hour affair.

In Stolle's case, with nearly 2,000 items locked up in the tower, the job took even longer. But by the end of the night, the account was stripped: Ownership of the house was transferred to one of Kiblinger's characters, assorted rares were relocated to storage and cataloged, and the rest was warehoused for future sorting. The messy complex of characters and possessions that had been Troy Stolle's virtual identity was broken down into parts far more valuable than the whole. The priciest items were listed on eBay within a day or two, and one by one they went off to the highest bidder.

But the most valuable of all was the last to go. Not that Kiblinger lacked for house buyers in the month that Stolle's tower stood at auction. He sold one property to a single mom in Colorado, another to a manager for a database company in California. Yet another went to a woman in Virginia, who bought the house for her mother, an Alzheimer's sufferer whose last link to reality was her Ultima sessions with her daughter. Any of these bidders might have wound up with the tower that Troy Stolle built.

In the end, of course, it went to John Dugger, a Wonder Bread deliveryman in Stillwater, Oklahoma.

Kenn BrownPhoenix Helmet ($137).

"A wage of $3.42 an hour is sufficient to sustain Earth existence for many people," writes Castronova, in his report about the economy of EverQuest. "Many users spend upward of 80 hours per week in Norrath, hours of time input that are not unheard of in Earth professions. In 80 hours, at the average wage, the typical user generates Norrathian cash and goods worth $273.60. In a month, that would be over $1,000, in a year over $12,000. The poverty line for a single person in the United States is $8,794." Do the math, Castronova suggests, and the bottom line is this: "Economically speaking, there is little reason to question, on feasibility grounds at least, that those who claim to be living and working in Norrath, and not on Earth, may actually be doing just that."

Troy Stolle stopped living in Britannia months ago. And Bob Kiblinger rarely logs on anymore except to inventory the remains of somebody else's existence there. But John Dugger is another story.

Separated from his wife for the last four years, Dugger lives alone. Most of the time, when he isn't working, he can be found in what he calls his dungeon, a section of the garage walled off to make a small, barely ventilated room, where he sits five hours a night, eyes fixed on his computer screen and on the tiny, make-believe self he maneuvers through Britannia's cartoon landscape.

"People have told me I need to get a life," Dugger says.

And seeing him here in his dungeon, you might agree with them. Follow him into Britannia, though, and you might think again. Watch, for instance, as he shows a visitor around the tower he bought just a few months ago. Note, as Dugger and his guest walk their characters from room to room, just how thoroughly he's made the place his own.

Kenn BrownMarble table ($398).

The first floor, once the austere workshop of a hardcore craftsman, has become a bright, busy public gallery for Dugger's collection of rares and semi-rares. "That bucket of water you see on the floor there is a true rare," he says proudly, narrating the tour by telephone. "It cost me 600,000 gold." Nothing much had been done with the second floor, so Dugger turned it into an armory. Likewise the roof, which came furnished as a kind of game room, complete with playable chess and backgammon sets, has been buried beneath the lush foliage of a rooftop garden designed by Dugger's in-game girlfriend, the Lady Lickeretta.

"I did pretty much leave the master bedroom alone, though. I liked the way they did it," says Dugger. As it happens, he has no idea who "they" are. At first he thought the previous owner was a character named Blossom. She handed off the deed. But Blossom turned out to be one of Kiblinger's avatars – and not even Kiblinger at the keyboard but his cousin Eugene, who gets $10 an hour to run around Britannia doing the deliveries that used to take up most of Kiblinger's workday.

So now Dugger can only guess. "There's some stuff in the house that the label says was made by a Lord Nils something or other, so that might have been one of the characters on that account," he surmises. "And to be a lord, that means he hasn't died in a very long time, so that means he was pretty good at what he did."

Kenn BrownManure ($380).

Dugger excuses himself to run his character upstairs. In a minute, he says over the phone: "Here it is. 'Nils Hansen.' N-I-L-S H-A-N-S-E-N."

There's a further pause as Dugger seems to lose himself in contemplation of whatever piece of Troy Stolle's handiwork he's found. An "exceptional wooden armoire," perhaps, clicked into being years ago with virtual saw and lathe. Or maybe a full suit of agapite plate mail, hammered out at the forge downstairs.

Whatever it is, it's the same kind of puzzle the tower itself is. No more or less than any chess castle or Monopoly hotel, John Dugger's tower is a gamepiece, and yet it's also something more meaningful than any gamepiece has a right to be. For if it's true that economies are in many ways like games, and that the world's economy is getting more gamelike everyday, there remains one defining difference between the two: Games attract us with their very lack of consequence, whereas economies confront us with the least trivial pursuit of all, the pursuit of happiness. And while not even Dugger himself can say precisely how much happiness he bought when he bought that imaginary house, one thing was certain from the moment Troy Stolle put it up for auction. The game was over, and something as real as life was suddenly in play.